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2024 (12) TMI 480 - AT - Income TaxTP adjustment - comparable selection - M/s. Ireo Pvt Ltd., Indian Infrastructure Finance Company Ltd. and Esplande Developers Pvt. Ltd. are comparable entities - HELD THAT - Admittedly, there was no adjudication of the above issue raised by assessee by ld. DRP independently and it has been adjudicated by the ld. DRP in a wholesome manner without touching the issue raised by assessee in proper manner. Hence, it is appropriate to remit this issue to the file of ld. DRP to consider the argument of the ld. A.R. and decide accordingly. The issue in dispute in ground No.3.4 is remitted to the file of ld. DRP for fresh consideration after giving an opportunity of hearing to the assessee.
Issues Involved:
1. Jurisdictional issues concerning the validity of the DRP directions and assessment orders. 2. Transfer Pricing issues related to the determination of the Arm's Length Price (ALP) for interest on Compulsory Convertible Debentures (CCDs). 3. Specific issue regarding the inclusion of Esplande Developers Pvt. Ltd. as a comparable in the transfer pricing analysis. Detailed Analysis: 1. Jurisdictional Issues: The appellant challenged the jurisdictional validity of the assessment orders and the directions issued by the Dispute Resolution Panel (DRP). The key arguments included the absence of a valid Document Identification Number (DIN) on the DRP directions, the manual issuance of the assessment order without a digital signature, and the orders being barred by limitation. However, these grounds were not pressed by the appellant during the proceedings, and hence, they were dismissed as not pressed. 2. Transfer Pricing Issues: The appellant contested the determination of the ALP for the interest on CCDs at 12.5%, which resulted in a transfer pricing adjustment of INR 4.38 crores. The appellant argued that the lower authorities erred in rejecting their transfer pricing documentation and in conducting a fresh analysis without satisfying the conditions stipulated under section 92C(3) of the Income Tax Act. The appellant also highlighted errors in the benchmarking analysis, including the selection of the database, economic and functional comparability, and the non-consideration of risk adjustments. However, these grounds were also not pressed by the appellant and were dismissed. 3. Inclusion of Esplande Developers Pvt. Ltd. as a Comparable: The primary issue pressed by the appellant was the inclusion of Esplande Developers Pvt. Ltd. as a comparable in the transfer pricing analysis. The appellant argued that Esplande Developers Pvt. Ltd. should be excluded due to it being functionally dissimilar, having related party transactions, and the lack of sufficient data to determine comparability. - Related Party Transactions: The appellant argued that the debentures issued by Esplande Developers Pvt. Ltd. were to its related parties, which does not qualify as an "uncontrolled transaction" under Rule 10A(ab) of the Income Tax Rules. Therefore, it should not be considered a comparable. - Lack of Data: The appellant highlighted the absence of detailed data regarding the issuance of CCDs by Esplande Developers Pvt. Ltd., making it difficult to ascertain the factors behind the interest rate charged. - Functional Dissimilarity: The appellant contended that Esplande Developers Pvt. Ltd. is a special purpose entity formed for a specific project, making its financial transactions non-comparable to those of the appellant. The Tribunal noted that the DRP did not independently adjudicate this issue and addressed it in a general manner without specifically considering the appellant's arguments. Consequently, the Tribunal decided to remit the issue back to the DRP for fresh consideration, instructing them to evaluate the appellant's arguments and provide a decision after giving an opportunity for a hearing. Conclusion: The appeal was partly allowed for statistical purposes, with the specific issue concerning the inclusion of Esplande Developers Pvt. Ltd. as a comparable being remitted to the DRP for further examination. The Tribunal emphasized the need for a detailed and specific adjudication on this matter, ensuring that the appellant's contentions are thoroughly considered. The order was pronounced in the open court on 4th June, 2024.
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